FTX Cut Maximum Leverage From 101x to 20x

FTX reduced the maximum leverage available on its cryptocurrency derivatives exchange from 101 times collateral to 20 times on July 25, 2021, according to a contemporaneous announcement by chief executive Sam Bankman-Fried.

The change removed one of the most aggressive settings then offered by a major crypto trading venue. It did not eliminate leveraged trading: a customer using the new maximum could still establish a position with a notional value as large as 20 times the collateral committed. It did, however, substantially narrow the exchange’s highest permitted exposure.

The decision mattered because cryptocurrency derivatives platforms combined continuous trading, volatile collateral and automatic liquidation systems. When losses pushed an account below its maintenance requirement, the venue could close positions without waiting for a conventional margin call. That structure could turn rapid price movements into forced buying or selling, particularly when many traders held similarly leveraged positions.

What FTX changed

Bankman-Fried said FTX was removing leverage above 20x beginning July 25. The previous ceiling was 101x, a figure confirmed by contemporaneous reports from The Block, Forbes and, on July 26, Bloomberg.

Maximum leverage describes the relationship between collateral and permitted notional exposure; it does not establish how much leverage customers actually used. Liquidation thresholds also depend on maintenance-margin rules, fees, collateral composition and contract specifications. A 20x ceiling therefore cannot be converted into one universal price movement that would liquidate every position.

Bankman-Fried claimed that leverage above 20x represented “way less than” 1% of FTX volume and positions and that average leverage on the venue was approximately 2x. Those were company-supplied estimates. The announcement did not disclose the observation period, contract population, account-weighting method or supporting dataset, so they should not be treated as independently audited market statistics.

He also argued that liquidations represented less than 1% of FTX volume and said the venue began liquidations using ordinary orders. Those statements described FTX’s own risk system and rationale. They did not demonstrate how that system would perform during every market disruption or establish comparable liquidation rates at rival exchanges.

A growing exchange changed its risk boundary

The policy arrived five days after FTX announced a $900 million Series B financing that valued the company at $18 billion. The company’s July 20 release named more than 60 participating investors and claimed more than one million users and average daily trading volume above $10 billion.

Those scale figures provide institutional context for the leverage decision, but they were issuer-reported measurements without an accompanying audit, venue-level calculation or defined averaging window. The financing announcement nevertheless showed that the July 25 policy came from a rapidly expanding exchange whose operating choices could influence competitors and expectations across crypto derivatives markets.

The July 25 record did not establish that regulators ordered the reduction. Bankman-Fried presented it as FTX’s decision and described leverage above 20x as a small, nonessential and sometimes unhealthy part of the cryptocurrency ecosystem. Any interpretation that the company was responding to regulatory pressure remained analysis rather than a verified causal fact.

What remained unresolved

The available announcement did not specify how existing positions above 20x were transitioned, whether leverage limits differed among contracts or how quickly every account interface reflected the new ceiling. No event-specific cryptocurrency price reaction is asserted because the policy coincided with other market-moving reports and the reviewed evidence does not isolate its effect.

Later context

The Bank for International Settlements’ December 2021 Quarterly Review later listed FTX’s maximum leverage at 20x and explained how high leverage could amplify procyclical selling through forced liquidations. That institutional assessment corroborates the changed ceiling and clarifies the mechanism, but it was not available on July 25, 2021.